Since December this monthly report series has applied dog dividend methodology to each of eight major market sectors: basic materials, consumer goods, financial, healthcare, industrial goods, services, technology, and utilities.
The ninth sector, conglomerates, according to Yahoo Finance, contained just eight firms, five of which pay dividends. Thus the reporter declined to apply dogs of the index metrics to such a limited universe, declaring, "such a task is comparable to a dog show judge trying to evaluate a Chihuahua based on St. Bernard conformation standards."
Two key metrics determined the yields that ranked index or sector dog stocks: (1) stock price; (2) annual dividend. Dividing the annual dividend by the price of the stock declared the percentage yield by which each dog stock was ranked. Investors select portfolios of five or ten stocks in any one index or sector by yield to trade. They await the results from their investments in the lowest priced, highest yielding stocks they selected and pray that the price of every stock they now own climbs higher (having locked in a high yield percentage at purchase).
This Dogs of the Index strategy, popularized by Michael B. O'Higgins in the book "Beating The Dow" (HarperCollins, 1991), revealed how low yielding stocks whose prices increase (and whose dividend yields therefore decrease) can be sold off once each year to sweep gains and reinvest the seed money into higher yielding stocks in the same index.
Comparative Methods Used
First, the entire list of technology sector companies was sorted by yield as of February 24 using Ycharts.com to reveal the top thirty. Market performance of these thirty selections was then reviewed using five months of historic projected annual dividend history from Yahoo Finance with annual divided projections reviewed and adjusted for market realities.
Thereafter, today's article attempts to assess the relative strengths of the top ten technology sector dividend dogs as of February 24 vs. the Dogs of the Dow index February 10 stock list. Annual dividends from $1000 invested in the ten highest yielding stocks in the sector and index were compared to the aggregate single share prices of the top ten stocks in the sector and index.
Technology Dividend Dogs
After many dividend adjustments and price changes since January, the February list showed all new firms at the top and cut the number of industries represented from eight to five. Long Distance Carriers were denoted by top dog Otelco (OTT); Diversified Communications were illustrated by IDT Corporation (IDT); Wireless Communications included two firms: Cellcom Israel (CEL), and Partner Communications (PTNR); Telecom Services Foreign included two firms: Telefonica (TEF), and Telecom New Zealand (NZT) ; Telecom Services Domestic was represented by three firms: Frontier Communications (FTR), Windstream Corporation (WIN), and Consolidated Communications Holdings (CNSL); Information Technology Services joined the top ten through MIND C.T.I (MNDO).
Placing Otelco at the top is debatable in light of the company's 2011 annual report. It states: "There can be no assurance that we will have sufficient cash in the future to pay dividends on our common stock at the historical rate or at all." The divided stated is based entirely on past performance.
Vertical Moves in Technology Dividend Dog Stocks
Going back four months, Cimitron claimed the top of this list by yield in October and stayed there into January. The Services list moved from bearish to bullish between December 16 and January 20. As of February 25, Otelco claimed the yellow tint as top techno dog due mostly to attrition as former lead dogs dropped out while their forward looking dividend prospects faded.
Color code shows: (Yellow) firms listed in first position at least once between November 2011 and February 2012; (Cyan Blue) firms listed in tenth position at least once between November 2011 and February 2012; (Magenta) firms listed in twentieth position at least once between November 2011 and February 2012; (Green) firms listed in thirtieth position at least once between November 2011 and February 2012. Duplicates are depicted in color for highest ranking attained.
Bullish vertical moves made since January 20 included the top stock by yield, Otelco, whose share price increased 7.95%; Telecom New Zealand price increased 5.7%, but it's dividend was cut 29.25%; Consolidated Communication Holdings showed a 1.00% gain; MIND C.T.I. price climbed 11.81% while it's dividend was slashed 37.5% to $.20.
Bearish moves for the same period were experienced by six firms in the top ten: IDT Corporation had a 9.6% price decline; Cellcom Israel climbed into the top ten techno dog pound by yield after posting a 10.71% price decline combined with a $.04 or 2.61% dividend cut. Telefonica dropped .634% in price; Partner Communications sagged 13.08% in price; Frontier Communications price went down 4.72%, while it's dividend also plunged $.35 or 46.7%; Windstream Corporation experienced a 1.38% price drop.
Dividend vs. Price Results for Technology Sector vs. Dow Dogs
Below is a graph of the relative strengths of the top ten technology dividend sector stocks by yield as of February 24, 2012 compared to those of the Dow index. Using four months of historic projected annual dividend history from $1000 invested in the ten highest yielding stocks each month, and the total single share prices of those ten stocks created the data points for each month shown in green for price and blue for dividends.
Conclusion: Technology Sector Dogs Clamor
The February technology group of ten top dividend payers showed a 24.81% increase in aggregate single share prices over the five monthly points surveyed. Dividends from $1,000 invested in each of the top ten declined 35.64% for that period.
Meanwhile, the Dow index moved beyond convergence as dividends from $1,000 invested in the top ten sank lower than aggregate total single share prices in February. Dow's 10 top dividend payers showed a 25.89% increase in aggregate single share prices over the five monthly points surveyed. Dividends from $1,000 invested in each of the top ten Dow dogs declined 5.75% for that period.
The technology sector top ten showed about $523 more annual dividends (with equally bigger risk) from $1,000 invested in each stock at a $348 lower aggregate share price for the top ten dogs than those of the Dow as of February.
At the end of each month, two summaries will conclude this new series of articles by showing comparative results of yield and price for all eight sectors reported: basic materials, consumer goods, financial, healthcare, industrial goods, services, technology, and utilities.
Disclaimer: This article is for informational and educational purposes only and shall not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security. Prices and returns on equities in this article are listed without consideration of fees, commissions, taxes, penalties, or interest payable due to purchasing, holding, or selling same.